Surging property prices

Surging property prices

Australia is set for a prolonged period of surging property prices given annual building approvals are tracking at only about one quarter of population growth, according to a national buyers' agency.

Analysis by Your Property Your Wealth has revealed that annual building approvals of just 176,043 for the year ending February 2024 represent just 26 per cent compared to net national population growth of 659,800, according to the Australian Bureau of Statistics.

Your Property Your Wealth Director Daniel Walsh said the fact that population growth was four times more than the number of seasonally adjusted dwelling units approved was set to drive property prices higher for the foreseeable future.

"You simply can't have such a significant gap between demand and supply without it resulting in soaring property prices," he said.

"Plus, the latest monthly building approvals show that the situation is just getting worse with high interest rates and construction costs decimating the building industry and with it any semblance of a balanced market.

"The last time there was such a supply and demand imbalance between population growth and building approvals was decades ago."

Further analysis found that there is a shortfall of nearly 90,000 dwellings per annum given the average household size in Australia is 2.5 persons.

Mr Walsh, who is also the author of 6 Principles To Retire Younger & Richer, said the housing crisis was set to be deep and long with no medium-term remedy in sight. "I wouldn't be surprised if it took a decade for the equilibrium to be restored," he said.

"In the meantime, we are going to witness ever-increasing property prices because we simply do not have enough dwellings to house our current population, let alone the hundreds of thousands of new residents set to make our country home in the years ahead."

Mr Walsh said the only possible way that the housing undersupply crisis could be reversed would be if interest rates start to fall because of lower inflation.

"That will stimulate and support the construction sector to build more dwellings," he said.

"Lower interest rates will also make people feel more confident given 90 per cent of their wealth is tied up in property.

"My picks for the strongest price growth until that happens is our more affordable capital cities such as Perth, Brisbane, and Adelaide.

"I am also quite bullish about Melbourne – despite the current market narrative – and feel that Sydney will also make a resurgence once interest rates decrease."


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